Jim Simons - The Mathematician Who Conquered Wall Street

Jim Simons, famously known in investment circles as the founder of NYC-based Renaissance Technologies, but not famous for giving very many interviews, sat down for a fascinating chat with Chris Anderson.

For over two decades Simon’s Renaissance Technologies hedge fund employed mathematical models to execute trades around the world.

While the typical hedge funds were charging “Two and 20”, two percent fixed fee and 20 percent of the profits, Renaissance Technologies, according to Simons, charged “Five and 44”. He says they charged the highest fees in the world at one time, but still made their investors spectacular amounts of money. When people got upset with the high fees, Simons would tell them they could withdraw, though the typical response was “How can I get more?” Simons eventually bought out all his investors at a certain point because there’s “..a capacity to the fund.”

Simons started his career as a “code breaker” and was eventually fired for his views on the Vietnam War. He was also the Chair of the Department of Mathematics at Stony Book University for a decade before founding Renaissance Technologies in 1982.

Simons began trading in his late 30’s and it went well. Starting with a little money, he says he was able to make quite a lot of money with what he called pure luck. After that he started hiring a few mathematicians and began working on models. They designed and tested various algorithms, which became better and better over time.

When it came to data, everything was gist for the mill. Weather, annual reports, quarterly reports, etc. He would take in terabytes of data a day and sift through it looking for anomalies.

According to Simons, one anomaly may be random, but the secret was to have enough data to see if the anomaly persisted for a sufficiently long enough time where the probability of the anomaly being random was low. He says they tried a lot of things to see what worked best. They stayed ahead of the pack by finding other approaches, often short term, which leveraged a tremendous amount of data.

Simons retired from Renaissance Technologies in 2009. His flagship Medallion Fund had one of the best records in investment history, returning more than 35 percent per year over a 20-year span. Reportedly worth $16.5 billion, he now concentrates on philanthropic work. You can view the entire interview here